Adhaar’s $11 billion annual savings: Claim with no solid basis

Former Chief Economist of the World Bank, Paul Romer recently stated that World Bank economists use fabricated data from time to time. Widely-quoted estimate of $11 billion annual savings due to Aadhaar is one recent example of this.

According to the Bank’s World Development Report 2016, many subsidies in India are being converted to direct transfers using digital ID, potential saving over $11 billion per year in government expenditures through reduced leakage and efficiency gains.

Luckily, it caught eyes of Indian officials, who said that the$11 billion figure cited in this report is not a saving figure at all. In fact, it is just an estimate of Indian government’s total annual expenditure on major cash transfers.

In order to pursue the matter, the World Bank arranged for soft copies of World Development report 2016 to make a correction, which is very intriguing.

This claim of huge saving invoked two more studies, one suggesting that biometric smart cards helped to reduce the National Rural Employment Guarantee Act (NREGA) leakage by 10.8% and another saying direct benefit transfer of LPG subsidies reduced the purchase of subsidized LPG cylinders by 11-14%.

All in all, the revised footnote looks more like an attempt to paper over the cracks than a piece of serious research.